A franchise agreement is a complex and unnamed contract. As a legal agreement, it creates a franchise relationship between two parties, the franchisor and the franchisee. The franchise relationship is a form of permanent cooperation. It amounts to a set of industrial and intellectual property rights, business name, technical knowledge and business methods.

The franchise agreement should contain certain essential elements, such as the indication of goods and services which the franchisee has been authorised for; the scope and duration of the protection of conferred rights; the duration of the contract; the teritorry in which the transfered rights are going to be used; and provisions regarding the payment of the compensation fee. Moreover, it should include the method of transfer of the conferred rights, and the type of assistance and supervision by the franchisor.

Under the franchise agreement, the franchisor assigns the exclusive rights to sell goods or perform services to the franchisee as the other contracting party. The franchisor transfers its know-how, business experience and concept to the franchisee. The franchisee as the recipient is obliged to operate under the franchisor’s trademark and to pay a particular fee. It is an unnamed contract that is bilaterally binding, formal, burdensome and a contract with permanent benefits. The Serbian Civil Code does not define it, yet general rules of contract law, general business conditions, and the analogous applications of other relevant contracts defined in the Civil Code apply to it. The absence of a national law defining a franchise agreement in most European countries has been compensated by the European Code of Ethics for Franchising compiled by the European Franchising Federation.